Copyright Notice

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the author, except in the case of brief quotations embodied in critical reviews and certain other non-commercial uses permitted by copyright law. For permission requests, write to the author, at the address below.

Sakmongkol ak 47

ariff.sabri@gmail.com

Tuesday, 1 December 2015

Dr Mahathir,
PM and UMNO president for 22 years, is just a retired former politician. Can UMNO Malays accept this insolent
description? They probably can and don’t care because they are just a pliable putty.

Might as
well describe Dr Mahathir’s criticisms as senescent musings. Or just say Dr
Mahathir is getting senile. See whether these descriptions affect the 3.4
million UMNO members less the 22,000 ketua cawangans, the 48 or more MKT
members and the 191 divisional leaders.

UMNO
people, those who can read and understand English, must reject this kind of
treatment on the greatest UMNO Malay leader. I find it strange as a Malay DAP
member, having to defend Dr Mahathir alongside a few other cyber warriors.I can only justify my stand, because, I am part of the bigger number of Malays who do not subscribe to
the values of present day UMNO Malays. Remember,
the 3.4 UMNO Malays is just less than 20% of the Malay population of some 18
million.

Because of
that, Arul Kandasamy is excited. He tells everyone that the sale of Edra Energy
for RM9.83 billion at current price, is a vote of confidence for the Malaysian
economy. The stock market did rally and the Malaysian Ringgit improved.

It reduces
1MDB debt up almost RM18billion. At the sale price of RM9.83billion, we have broken
even.

There are 2
things I find disagreeably troublesome. One, the sale price being a vote of confidence
in our economy. Two, broken even means what?

Break even
in economics, is the point where total revenue equals total costs. Hence there is
no loss or profit. Perhaps, this is what Arul Kandasamy means. If we had not
made profits, at least we didn’t make any losses. That’s should be comforting. Shouldn’t
it?

That means
RM9.83 billion today, is the same as the RM9.83 billion at the time 1MDB bought
all the IPPs. That’s one. Two, didn’t we buy the IPPs for RM12 billion. So how
can the sale price of RM9.83 billion at today’s price neutralise the RM12 billion?
And we really hope CGN really took over
the inherited loan too.

He says Dr
Mahathir continues to mislead the public. In other words, Arul Kanda says Dr
Mahathir does not understand finance. 1MDB says it gets extra money from the
revenue earned while holding the assets for several years. 1MDB says it gets
RM2 billion in cash dividends. That would make RM9.83 +2.0= RM11.83 billion. We
break even!

CGN also
takes over the inherited loan that has become, as stated by 1MDB, RM7.43b. the original
inherited loan of RM6b must have accumulated interests. But never mind, CGN has
taken over the loan.

So, with cash of RM9.83b, plus RM2b in cash
dividends and RM7.43b debt transfer, we are ok what? So now, let’s find willing
buyers for our land and other assets.

There is a flaw
in the narration. RM9.83b 4 years ago isn’t the same as RM9.83billion today.
1MDB took financing to purchase the IPPs as well as incur other financial
costs. It took loans in both US Dollars and Malaysian Ringgit.

We bought
the IPPs at RM12 billion (let’s not talk about inherited debt), and now sell it
for RM9.83b. how do we cover the shortfall? We cannot disingenuously add the
RM2 billion cash dividends to make up for the shortfall. If we do, than the RM2
billion is just a happenstance winning 1MDB the argument against retired and
former politician Dr Mahathir that we recovered our RM12 billion initial purchase
price.

What the holding
costs? If indeed Edra made RM2.17billion cash dividends, didn’t it need to
service the loans it took? They took loans in US Dollars and Malaysian Ringgit ,
we need to ask, what was the cost incurred in getting the cash dividends? They also paid brokerage fees to Goldman Sachs.t These costs may well overshadow the RM2b cash dividends.

1MDB
borrowed both in US Dollars and Malaysian Ringgit. It has to account for the interest
payments. What is the net returns then? Add the net value amount( cash
dividends minus cost of loan to the sale value. Do they add up to reduction of loans
up to RM18 billion?

Who is
misleading the public now?

Going back
to the beginning, we still cannot cancel out the possibilities of incompetence,
recklessness or pure intention of profiteering when we paid RM18 billion for
the assets including assuming an inherited loan obligation of RM6 billion.

Why did we
do that? Who authorised the purchase of companies with existing loan
obligations? The purchase price of RM12 billion (not including the inherited
loan) was regarded as an inflated price. Why buy at inflated price when market
valuation placed the assets at RM10 billion tops.

We must remember,
if we allowed the IPPs to reach shelf life, we could have bought these IPPs at
a much lower price. Was it done to help certain people in these IPPS? Or was it
done to reap regulatory capture at a future date?

Reports about
donations into charitable foundations by some of these IPPS must be viewed with
suspicions.

Vote of confidence
on our economy? It looks more like an opportunity to buy assets from a desperate
seller.

How is that
so? That increases our USD Dollar reserves? The sale immediately unlock hitherto
unheard of economies? Create jobs, reduces inflation, bring the cost of living
down?

Will edra
energy be given more quota to supply electricity? Will they be allowed to sell back
to TNB at a higher price to recoup this initial investment?

RM9.83 billion in current prices isn’t the same as RM9.83 billion when Edra bought
those IPPs then. Part of the loan taken to finance the purchase as pointed out by
many was in US Dollars. It was trading at around RM3.2 at that time and now it’s
RM4.2. For every USD Dollar we lost RM1.

When 1MDB bought
out these IPPs from Genting, Ananda, Jimah Power and so forth, the Malay supremacists
from within and outside UMNO were hailing the move as a step of Malay-nising
the ownership of these strategic assets. These strategic assets must be in
Malay hands.

They are
now quiet a church mouse but will respond in caveman-like manner when challenged.
Or make police reports asking the police to investigate what has not been
established as a crime yet.

Number one-
if these assets are strategic, we don’t sell them. It’s like giving up our advantage
and that will make us susceptible. Number two, in order to allow Edra to purchase
100% equity, we had to forfeit our legal requirements on foreign ownership. We abandon
our legal limitation of 49% foreign ownership.

Number three-
the Malay supremacists have to swallow their saliva- the UMNO leadership is
selling these assets to the Chinese, Communists and Godless people.

So in the
end- it does not matter whether he cat is black or white, as long as it catches mice.

15
comments:

Furthermore, and if I am not mistaken, for the 1MDB to acquire all those that come under Edra (the three IPPs plus overseas ones) the total amount of borrowing it incurred was much more than what it spent!

All in all, can one imagine the kind of people that we are largely to befit this kind of treatment from the so called our political and business leaders? We must have been totally rotten people to deserve such terrible treatment…

And to think that this kind of thing taking place as far as the 1MDB is concerned is par for the course as far as the government's operations is concerned involving the GLCs, government departments, etc.: just about every single time one way or another the rakyat is the ultimate party faced with the horrendous burden while the leaders and their associates continue to make tonnes of money as if there is no tomorrow!

We have been taken for a ride - for far too long. Is the end not too long into the future? Or, is it the case that worse deals are coming our way? After all, they have so far gone scot free! What say you Umno grass roots, Pas, Felda inhabitants, kampong folks, Sarawakians, Sabahans, nonregistered voters, non voting registered voters (just to name some…)?

If you keep 9.83 billion in fix deposit at 4% per annum for 4 years, the interest/dividend you receive is 1.5782billion! This Nasi kandar thamby is pusing pusing thinking everyone is an idiot like him.

When Onn left UMNO, its leaders beginning with Tunku Abdul Rahman (who succeeded Onn) and Datuk Razak Hussein right down to the lowly branch committee member as well as ordinary members, did not demonize Onn. They respected his decision to leave and left it at that.

The UMNO of today is a far different party. When former Prime Minister Mahathir retired after leading the party for over two decades, those small characters he left behind took every opportunity to snipe at him. Malay culture has not changed; only UMNO - Dr Bakri Musa

Datuk,all your questions are valid and the PAC head Hasan and the PAC team must question Arul why the figures don't match. Who's bluffing who, who's lying to the rakyat?Arul has a lot on his bald pate.

I think Arul Kaunda Kundi and BUMNO/SCUMNO Ministers forgot that after acquiring the crony IPPs at a grossly inflated illegal valuation of RM18 billion, 1MDB immediately wrote off over RM2 billion in goodwill, 3 years ago.

Basically, this means the current value of IPPs in 1MDB's balance sheet will be about RM16 billion.

So, if we add everything up, I bet my bottom ringgit that there's, taking into account interest on RM18 billion, no way 1MDB "broke even" on the Edra investment.

Even if by some miracle they did, and taking into account the opportunity cost of absolutely risk free interest of about 4%, the Advisor, Chairman and Board of Directors of 1MDB should all be sacked forthwith. This is the same performance standard to which we hold Chairmen and CEOs of Plcs accountable to. We don't employ these people at fancy remuneration packages to turn in "break even" shambolic results when they borrow RM18 billion against a paid up capital of RM1 million!

Arul Kaunda Kundi, while not responsible for the IPP fiasco, should nevertheless be sacked, because he doesn't seem to know how to add up 2 + 2!!

1/39.83 billion in f/d at 4% per annum for 4 years, compounded would be 1.6697 billion, and this is pointedly clear according to DPP, “opportunity cost of absolutely risk free interest,” and therefor the biggies involved, “should all be sacked forthwith.”

Comments on big money and big time money managers: [extracted from ‘After The Music Stopped’ [ATMS] by Alan S Blinder (2013), and ‘Why I left Goldman Sachs’ [WILGS] by Greg Smith (2012)]

1. . . . , you will see that the bank [imaginary bank,BBSB] funded itself exclusively by deposits and equity. That’s quite unrealistic for big money-center banks, which have multiple and complex source of funds. Nonetheless, commercial banks do have deposits—that’s why we call them banks. Investment banks do not. They fund themselves almost entirely by borrowing. [p52 ATMS]

2. You might have thought that this near-death experience would have led to some regulation of both hedge funds and the exploding markets for derivatives. But you would be wrong. In a famous incident earlier in 1998, Brooksley Born, then head of the CFTC [Commodity Futures Trading Commission], was sternly rebuked when she suggested that maybe OTC [over the counter] derivatives should be brought under the CFTC’s regulatory umbrella. Her efforts were blocked, to put it politely by the government’s financial heavyweights at the time: Fed Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Secretary Lawrence Summers, and SEC Chairman Arthur Levitt. Turf was involved, to be sure. The little CFTC apparently wanted to jump into the driver’s seat without taking too many other passengers along. . .The quartet criticized Born publicly warning that regulating derivatives would create legal uncertainties, stifle valuable innovations, and sending derivative trading offshore—maybe even capitalism as we know it. She was also on the receiving end of a verbal tongue-lashing from Summers. ¶ As the new Treasury secretary, Summers helped pushed the Commodity Futures Modernization Act of 2000 through Congress. The law explicitly removed any threat of CFTC regulation of derivatives contract among ‘sophisticated parties.’ ‘Sophisticated?’ The very word sounds ludicrous given the foolishness that followed. Maybe the operational word was parties, which broke out with reckless abandon once the regulatory DO NOT ENTER sign went up. According to ISDA [International Swaps and Derivatives Association], total notional volume soared from $70 trillion in 2001 to $445 trillion in 2007. [p63-ATMS]

3. One other important footnote to history: On Sunday, March 16 [2008], the same day that JP Morgan Chase announced its purchase of Bear Stearns and the Fed announced its approval of the deal, the Fed’s Board of Governors created the Primary Dealer Credit Facility. The PDCF made it much easier to lend money to securities firms by, for example, broadening the range of eligible collateral. Bear executives maintained that they could have averted bankruptcy without requiring assistance, if they had been given access to the PDCF. Jimmy Cayne told FCIC [Financial Crisis Inquiry Commission] that the PDCF came ‘just about 45 minutes’ too late to save his firm. No one will ever know. [p114-ATMS]

2/34. . . .when confidence goes, it goes. And it was going fast. Morgan Stanley lost cash to collateral calls, to withdrawal of funds, and to cutoffs of normal credit flows. Its liquidity pool dropped from $130 billion to $55 billion in a single week. ¶ Similar problems were plaguing Goldman Sachs—although, as befits its status as the fastest antelope, things weren’t quite as bad. . . Goldman, of course, was also borrowing from the PDCF and elsewhere. Bernanke later told the FCIC that, ‘We thought there was a real chance they would go under.’ ¶ Once again, the Fed looked for and found a creative emergency solution. On Sunday, September 21 [2008], both Morgan Stanley and Goldman Sachs applied to the Fed to become banks (technically, bank holding companies)—something that had been anathema to both of them before. After all, being regulated like a bank would crimp their styles in many ways—not to mention bringing in a lot of prying eyes. But as the panic of 2008 gathered force, the onerous burden of Federal Reserve regulation didn’t look quite so onerous anymore—especially when stacked up against the shelter from the storm that the Fed would provide. The Fed and the Justice Department approved their applications with a wink, a nod, and blazing speed, thereby pulling the beleaguered companies inside the Fed’s safety net. That stopped the runs . . . . When Wall Street opened for business on Monday, September 22, just a week after the Lehmann Brothers bankruptcy, there were no big, independent investment banks left. . . Prior to the crisis, the big investment banks had been the top dogs of finance. Theirs were the gold-plated names most of the sharpest MBAs and financial engineers wanted on their business cards. They were home to the Masters of the Universe. Then they were gone. [p153-154 ATMS]

5. The bill that ultimately passed Congress, the Emergency Economic Stabilization Act of 2008, ran to 451 pages, of which 261 dealt with TARP [Troubled Assets Relief Program], making that part of the Act (Title I) 87 times Paulson’s original length. But nowhere in those 261 pages is there a single word about using TARP money to inject capital into banks. Nowhere. [p192-ATMS]

6. If nothing else, Paulson was a man of action. The TARP passed on October 3; he changed its purpose completely on October 12; he was already force-feeding capital down the throats of the nation’s biggest banks on October 13. [p200-ATMS] [n.b: Secretary of the Treasury 2006-2009, ex-CEO of Goldman Sachs]

7. Over the weekend of September 13 and 14 [2008], Merrill Lynch and Lehman Brothers . . . toppled. On Sunday, Merrill Lynch was acquired by Bank of America, and in the early hours of Monday morning, Lehman Brothers filed for Chapter 11 bankruptcy. It was then (and still is) the largest bankruptcy in U.S. history. [p134-WILGS]

3/38. Several of us went in to the office on Sunday evening, September 21 [2008], because a lot of news had been breaking over the weekends . . . . It was the strangest thing to happen at 9:15 P.M. on a Sunday, when only a few people had been on the trading floor. The doors closed. Gary [Cohn] looked very tired and scruffy … ‘Crazy world we live in,’ I said in the blandest, most neutral tone I could find. It was a touchy time, and I was just trying to be friendly. ¶ ‘Tell me about it. I’ve been here the whole weekend, and I haven’t gone home much,’ Gary said. He looked as if he could have slept on his office couch the previous night. ¶ . . . even if there wasn’t a specific reason for Gary to be there, he’d probably just been strategizing. We would very soon learn the truth. ¶ As I got into a cab . . . checked my Blackberry. A fresh e-mail caught my eye. ‘The Federal Reserve Board approved the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.’ Holy shit! So that was why Gary Cohn had been working around the clock in the office all weekend. This was huge. [p135-136-WILGS]

9. In a single weekend, the institution of the investment bank, as it had once been constructed, had vanished forever. The Goldman Sachs of Sidney Weinberg, Gus Levy, and John Whitehead had vaporized—cleverly converted, through the eleventh-hour labors of desperate men (Lloyd Blankfein, Gary Cohn, and Morgan Stanley’s then-CEO, John Mack, among them), into an institution that could borrow money from the government at zero interest and then invest it at government bond rates, in essence making free money. Goldman Sachs and Morgan Stanley were now effectively getting paid by the government just to stay in business. [p137-WILGS]

All emphases in bold, mine.

And how much has 1MDB paid Goldman Sachs in fees and charges for arranging the bond sales? $300 million, $500 million, or $600 million?

From, http://www.wsj.com/articles/goldman-entangled-in-malaysia-fund-scandal-1444795262, “The scale of Goldman’s fees on the deal, which came to nearly $300 million, was controversial even within the bank, people familiar with the matter said. Goldman took the unusual and uncomfortable step of alerting the fund to its expected payday ahead of time to head off any recriminations down the road, the people said.”

All said and done, the 1MDB saga confirms that money, indeed, is fungible.

The best ludicrous part is that UMNO will spew its rotten lies to the uneducated Malays that the Malays have successfully finally bought over the energy plants from local Chinese owned companies like YTL and Genting. Unfortunately they don't have the balls to tell the truth again that all of them ended up with China's companies. What a stupid lies.